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Concept And Objectives Of Departmental Accounting

Concept Of Departmental Accounting

Modern life is very mechanical specially in big cities. The citizens of such cities expect all the goods and services just under a single roof. Contemplating the need of the consumers, the business men are also providing the expected service to the consumer just under a roof by opening large scale departmental stores. The departmental stores are the example of large scale retail selling just under a single roof. Different departments are involved for different goods to be sold out. To calculate the net result of the whole organization, a full fledged trading and profit and loss account is to be prepared. But to evaluate individual department, it will be credit worthy to prepare individual trading and profit and loss account. Such individual accounts will help to evaluate and control the different departments.

Objectives Of Departmental Accounting

The main objectives of departmental accounting are:

1. to check out interdepartmental performance

2. To evaluate the performance of the department with previous period result.

3. To help the owner for formulating right policy for future.

4. To assist the management for making decision to drop or add a department